The views expressed are those of the author and do not necessarily reflect the position of FORESIGHT Climate & Energy
There are many communities and industrial sites around the world where connection to a utility grid is either impractical or uneconomic. Remote islands, mining or oil and gas sites and military bases are a few examples and have historically relied on generators running on diesel or other fossil fuels—at significant environmental and financial cost.
Operators now want to maximise the use of renewable energy but this has been limited by the natural variability of wind and solar power. Renewable sources can drop by more than 50% in just a few minutes—a challenge that needs to be overcome when providing power continuity for critical equipment.
Battery energy storage is one solution that can provide services such as frequency support, spinning reserves or peak shaving. They require relatively little storage capacity but enable microgrids to maximise the usage of renewable generation, ensure stable grid conditions and avoid unnecessary and inefficient diesel operation. Microgrid operators thus benefit from increased resilience and reduced reliance on imported fuel for thermal generators.
The city of Cordova in Alaska’s wilderness, with a population of around 3000, gets most of its energy from 7.25 megawatts (MW) of run-of-river hydropower and has a thriving salmon industry. However, during the winter freeze, it has to rely on diesel generators capable of delivering 10.8 MW. Then, when multiple fish processing plants start up during the spring, electricity demand spikes unpredictably.
Local utility company Cordova Electric Cooperative (CEC) has traditionally managed this by running some of the generators in parallel to hydropower during the spring and autumn transition periods, as well as in the peak summer demand period. This approach to providing spinning reserves was losing more than 1 MW from river hydropower while burning expensive fuel.
CEC wanted to build greater self-reliance and make the most of its hydropower. It installed an energy storage system (ESS) with 1 MW power and 1 MWh storage capacity to ride through the spikes in demand, enabling full use of its hydropower capacity. It is now meeting 90% of electricity demand from renewable energy during the peak fish processing season of May to August, whilst saving 250,000 litres of fuel annually and reducing the wear and tear on the generators.
Operators of remote grids can use energy storage in combination with renewable generation to reduce their carbon footprint in response to the raft of new government targets to reduce greenhouse gas emissions. Furthermore, in many places, higher energy and carbon taxes are driving up the cost of fuel and encouraging operators to invest in renewables.
Incentives and funding are also available. Whereas tax incentives are a well-known tool used in the US to favour investments in renewables with storage, the European Union is planning to make funding available for climate-friendly projects under its Green Deal and post-covid recovery plan. Large greenhouse gas-reducing investment projects (including those embracing energy storage) can be supported under the new Innovation Fund, an EU funding instrument financed with resources from the EU Emissions Trading System.
Other sources of funding may be on offer, particularly where there is potential to help support industry and business for remote communities. For example, government funding is available for rural electrification projects in Africa, as well as for remote indigenous and industrial communities in north America and Australia.
For less remote sites, microgrids integrating energy storage can be deployed for industrial and commercial operators who want the flexibility to switch between grid-connected and island mode. The primary motivation being resiliency in case of grid outages. But such solutions also enable maximum self-generation and electricity bill optimisation, for instance, by avoiding peak demand charges or monetising demand flexibility.
For the future, we expect decentralised storage systems to generate additional revenue through participation in grid services markets, through demand response programmes and with the injection of active power back to the grid when financially attractive. Market designs are changing in many places in order to enable aggregation and monetisation of such services. Once firmly implemented for the long term, these mechanisms will improve the business case for decentralised self-generation and storage and favour a much broader adoption.
However, “double taxation” still applies in many jurisdictions and considerably hampers this business model as grid utilisation fees apply both during charging and discharging, considering energy storage both as a consumer and a producer. There is hope that the next revision of the EU’s Energy Taxation Directive avoids such double charging of storage facilities, especially when providing services that benefit the grid.
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